Taking Care in Governance Decisions: The Charity Commission's Warning to the RSPCA
The Charity Commission issued an Official Warning to the RSPCA on 22 August 2018, which criticised the organisation's recent decision to agree a substantial financial settlement with its former Acting Chief Executive upon his resignation in May this year.
1. What did the Official Warning say?
The Commission's key criticism of the RSPCA in this instance was in the way the decision was managed by the charity's officers. In particular, the Commission stated that the officers committed a breach of duty in the administration of the charity, in two ways:
- Failing to ensure they were sufficiently informed before making a decision about the settlement; and
- Failing to act with reasonable care and skill in relation to the negotiation with the former Chief Executive.
In order to rectify this misconduct, the Commission has recommended that the RSPCA takes the following actions:
- Ensure that the RSPCA Council (i.e. its trustees) adheres to the charity’s code of conduct;
- Provide formal training for Council members to ensure they are fully aware of their responsibilities as charity trustees; and
- Implement the recommendations of an independent report commissioned on the processes the charity followed in recruiting and appointing its chief executive.
In response to the warning, the RSPCA stated that it is "fully committed to the very highest standards of governance" and that it has implemented more than 90 per cent of the recommendations from an independent governance review carried out in 2016. It has since appointed a new Chief Executive for the organisation.
2. Learning points for charities
For context, this is the Charity Commission's sixth official warning since its power to issue these was granted in 2016. The Commission will have grounds to take further action if the warning is not heeded, including suspension of the charity's trustees or appointment of an interim manager for the charity.
The action taken in this instance highlights the point that settlement agreements entered into by charities are an area of concern for the Commission, and are something which may be scrutinised as part of examining a charity's governance.
Trustees of charities of all sizes should consider how they may avoid falling into a similar situation. Trustees will usually have discretion to enter into compromises with their staff in relation to settlement agreements such as these, unless this power is specifically excluded in the charity's governing document.
The extent to which Trustees should be directly involved in compromises relating to operational staffing matters will vary depending on the size of charity and seniority of employees affected. The more senior the employee, the more likely it is that the decision will impact on the charity's governance, requiring the trustees' direct oversight.
Boards should ensure that any delegation of such authority is subject to robust reporting procedures, with clear lines of accountability, taking legal or financial advice where necessary and providing training to trustees and/or those with delegated authority as appropriate.
If you are not sure what duties may apply to you or others involved in the management of a charity, Charity Commission Guidance on trustee duties (including responsible financial management and acting with reasonable care and skill) can be found here. Operational guidance on trustees' power to compromise can be found here.
If you would like more information in relation to any of the above issues, please do get in touch with Laura Sherratt or Ben Brice in the Charities team.